Distributed ledger

A distributed ledger is a method of record-keeping in which a single database of records on owners and transfers of rights exists not in one centre but as synchronised copies held by many independent network nodes. Participants add records not on an administrator's command but under a consensus rule described in advance: a change becomes part of the ledger once a sufficient share of the network has accepted it. The records form a chain in which each new entry relies on the content of the previous ones, so correcting an old record breaks the entire chain after it and remains visible to the other copies.

What trust in a record is built on

Such a ledger works because of three elements. The first is the cryptographic signature: the right to dispose of a record is confirmed by the owner's private key, not by an instruction to an operator. The second is the consensus rule, which determines whose version of the ledger is treated as correct when the copies diverge. The third is the openness of the history: any record can be verified from the moment it was created, and the absence of a record means the absence of a right.

Ledgers are divided into public ones, where anyone can become a node, and private ones, where the set of participants is defined in advance. The Russian market for digital rights is built on the second type: the ledger is maintained by a licensed information system operator, which is also responsible for admitting users and for the compliance of the records with the law. For a non-qualified investor, the volume of purchases of digital financial assets with variable income over a year is limited and does not exceed RUB 600,000; the restriction can be lifted by obtaining the status of a qualified investor.

Example: public ledgers and their largest assets

The best-known public ledgers record cryptocurrencies, and the size of such a ledger is usually measured by the market value of the asset recorded in it:

Where the term is misunderstood

The main misconception is to believe that a distributed ledger does away with record-keeping intermediaries. On the organised market, rights to conventional shares and bonds are still recorded by the depository, and the list of holders is compiled by the registrar; the technology changes the way a record is stored, but it does not remove the need for someone who answers to the owner for its accuracy. The second error is to equate a distributed ledger with a blockchain: a blockchain is only one of the formats, and in private systems a chain of blocks is not required at all.

The immutability of a record is also understood more broadly than it really is. The ledger protects against hidden editing of the history, but not against an error in the original record and not against the loss of a key: the record will remain valid from the network's point of view even if it was disposed of by someone other than the owner.